Friday, May 23, 2014

Money and Ayn Rand

      Ayn Rand and her followers worship money. But on money, she is so mistaken that she's not even wrong. From the Ayn Rand lexicon (
     Money is the tool of men who have reached a high level of productivity and a long-range control over their lives. Money is not merely a tool of exchange: much more importantly, it is a tool of saving, which permits delayed consumption and buys time for future production. To fulfill this requirement, money has to be some material commodity which is imperishable, rare, homogeneous, easily stored, not subject to wide fluctuations of value, and always in demand among those you trade with. This leads you to the decision to use gold as money. Gold money is a tangible value in itself and a token of wealth actually produced. When you accept a gold coin in payment for your goods, you actually deliver the goods to the buyer; the transaction is as safe as simple barter. When you store your savings in the form of gold coins, they represent the goods which you have actually produced and which have gone to buy time for other producers, who will keep the productive process going, so that you’ll be able to trade your coins for goods any time you wish.
     This is of course nonsense. The only reason money can “buy time” is that there is surplus productive capacity. Money cannot create that surplus capacity, nor is it needed to ensure that it will be used. Humans have invented many ways of doing this without money. What you need is a technology that multiplies the effect of human work, and a system of customs (usually in the form of mutual obligations) that will ensure the surplus will be stored and traded. Fact is, even today much trade is done without money. The basic rule is "mutual obligation". Money is the abstraction of the IOU, which was is itself a record of a specific obligation.. It's a store of mutual obligation. not of wealth.
     And like practically everybody, Rand misquotes St. Paul’s comment on money:
So you think that money is the root of all evil? . . . Have you ever asked what is the root of money?
     In fact, St. Paul wrote, The love of money is the root of all evil. Look it up!
     Money is a way of making trade with strangers possible, and thereby making strangers mutually dependent. Very useful invention, IOW. E.g., just try to calculate how many people have been involved in producing a ball point pen and making it available to you. A stranger is someone to whom you owe nothing, and vice versa. This makes interaction between strangers dangerous. Hence, all societies have had to invent ways of making at least temporary mutual obligation possible. Think of "guest right", for example. So, why do all those strangers work to produce and deliver a cheap pen to you? Because money makes it not only possible to trade with people you will never meet, it makes it easy to do so.
     Nowadays, money trades are used to measure economic activity, which produces such incomplete, gappy data that it causes pernicious delusions. Even in our highly monetised economy, at least 1/3rd of economic exchange does not involve money. In pre-money times, that was 100%.
     Basic rule about money: money and wealth flow in opposite directions.
     I think everybody needs a good introductory survey course in anthropology. It might cure many people of the notion that our economic arrangements are somehow inevitable (or, gaak!, god given). For over 95% of our existence as a culture-creating species, we humans have had no money. Yet humans managed to produce the goods and provide the services they needed. It’s true that money, because it accelerated trade, and more importantly enabled trade with strangers, accelerated the creation of wealth. But trade, and its beneficial effects on wealth creation and cultural exchange, existed long before money.
     2013-03-11 & 2014-05-23

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